The brand's executive creative director will exit in June 2014, six months after Lew Frankfort cedes the ceo title to Victor Luis.

One of the most storied duos in American fashion is parting ways as, after 16 years at Coach Inc. Reed Krakoff will step down in June 2014 as president and executive creative director in order to focus exclusively on his high-end namesake brand. Krakoff will exit Coach six months after its chairman and chief executive officer, Lew Frankfort, cedes the ceo title to Victor Luis, but will remain executive chairman.

Coach has begun a search for Krakoff’s successor, setting off speculation as to who might take on the role.

The news of Krakoff’s impending departure had no negative impact on Coach’s shares — in fact, they rose 9.8 percent Tuesday to close at $55.55 on the back of strong third-quarter numbers. Coach reported a 6.2 percent increase in net income to $238.9 million on a 7.1 percent rise in sales to $1.19 billion for the third quarter ended March 30. This compares with net profits of $225 million on sales of $1.11 billion in the same period a year earlier.

“I’m [pleased] to focus exclusively on the RK brand and to embark on the next phase of my career,” Krakoff told WWD from a bright conference room on the 12th floor of Coach’s headquarters in New York. “It’s relatively recent [that I made this decision], I’ve been so focused on Coach and the RK brand for the last bunch of years. I’ve been focused on preparing and getting ready for the next evolution of Coach, building a team with Lew, moving forward….It’s really taken up all my time.”

As part of that transition, Krakoff, 49, would have had to report to Luis. In light of Krakoff’s new plans, he will act more as an adviser to Coach than creative director until June 2014. Karen Harvey Consulting has been hired to find Krakoff’s successor.

The New York-based accessories brand, which launched Krakoff’s brand two-and-a-half years ago, said it would explore “strategic options” for the RK collection that “may involve a sale to a group, in which Krakoff would participate.”

As part of his new mission, Krakoff said he hopes to “create more awareness” around his line, which includes growing its global presence, as well as developing key segments such as its men’s business.

“We’ve had an amazing reaction to the brand, without much awareness, whether it’s been with Michelle Obama, or on the cover of Vogue or the windows at Saks or Bergdorf’s,” he said. “It’s really to leverage the desire that we already see.”

Frankfort echoed Krakoff, adding that the brand has experienced “substantial growth.” Although he would not put a number to that growth, he did point to RK’s distribution, which includes the Madison Avenue flagship, two additional freestanding stores in Las Vegas and Short Hills, N.J., and nine concession locations in Saks Fifth Avenue. The brand is also sold at Saks, Bergdorf Goodman and Neiman Marcus; in international stores including Lane Crawford, Colette, Le Bon Marché, Harrods and Tsum, and on Net-a-porter.

Saks was the retail launch partner for the Reed Krakoff label in 2010 and currently has several shops-in-shop for its handbags and sells the ready-to-wear in select locations. The retailer’s Manhattan flagship was set to welcome the designer for a personal appearance at the Reed Krakoff handbag boutique on the main floor on Wednesday.

“I got to know Reed through Coach and was so impressed with Reed and Lew, two of the most professional people in our industry,” said Ron Frasch, president and chief merchant of Saks. “We launched the brand, and we have done very well. I am pleased for Reed. If this is what he wants, I couldn’t be happier.”

Frasch called the move “a really big deal.”

“He has already made a commitment. Now he is making a bigger commitment, to his own stand-alone brand,” he said. “It’s giving him more opportunity to be the face of one brand versus being the face of two brands.”

Frasch added that it will also serve the brand well as the designer further develops his direct-to-consumer channel through freestanding stores.

Linda Fargo, Bergdorf Goodman’s senior vice president of the fashion office and store presentation, said, “Reed has so clearly defined the DNA of Coach that it should be able to continue and evolve without his daily attentions. It’s exciting for him, and for us, that he will be able to focus more intensively on [the Reed Krakoff label].

“The news bodes very well for his namesake brand,” she added.

As for who could succeed Krakoff at Coach, Terre Simpson, president of Simpson Associates, an executive search firm, said she would advise identifying very high-profile executive designers in global brands such as Louis Vuitton, Burberry and Jimmy Choo “that could translate to the Coach aesthetic and lifestyle concept they are seeking to maximize.”

Some names that have popped up as possible successors to Krakoff are Tracy Gardner, former president of J. Crew brand, direct and retail, who’s now a consultant to the Gap, and Deborah Lloyd, president and chief creative officer of Kate Spade.

Known as one of the best merchant-marketers, Krakoff is “extremely commercial, and that’s a compliment,” said one source. “He has a sense of what works and what doesn’t work. He can take a trend in the market and make it Coach’s.…I don’t think they need another president, they need a creative director. I think the person who’s coming in has a much harder job than Reed had. It’s a hard job because Reed is so good at it. He’s the product voice behind Coach, and he has been for years.”

Elaine Hughes, owner of E.A. Hughes, an executive search firm, said, “Any company, especially one that’s publicly traded, where there’s a stall in stock price and comes a resurgence of a new brand, like a Michael Kors, when you have a change of the ceo at the top, it impacts everything.”

She said that Krakoff was an integral part of taking Coach from a leather resource to a multifabric, diverse handbag, small leather goods, footwear and apparel firm. “There are no names that pop into my head as an overall creative director because there isn’t a singular individual in any multibillion company that does it. What Reed has that is unique is he not only had a great aesthetic sense and an understanding of raw material, but he also had a good business head,” said Hughes.

“Reed, like a John Varvatos, started his career at Polo Ralph Lauren. What they saw was a creative genius that kept his hand on the product. Everything had to be approved by Ralph. That is very similar to how John Varvatos runs his business, and how Reed runs his business. There are very few people who do that, who are not a principal of a company. You can’t look at Tory Burch and say she’s a possibility because she owns the company.…Vince Camuto is a design genius, but he owns the company….It could be somebody from Europe. Europe has a lot of visionary talent. It’s a matter of who can calibrate to that and how do you commercialize that to billions of dollars,” said Hughes.

She said that under Luis, there will be an evolution of the Coach culture. “He’s a global thinker, he’s a very collaborative guy, and no matter what the company is, the culture stems from the ceo office,” she said.

“I’m not surprised,” said Kirk Palmer, owner of Kirk Palmer & Associates, an executive search firm, when discussing the Krakoff news Tuesday. “Clearly Reed was tied to the hip with Lew. They built an iconic brand. It’s going to evolve, and it’s ready to go to the next level. Victor will be different than Lew, and they’ll be a different creative direction from Reed.” He said whoever is doing the search “can call anyone.” It’s really “Who do I want?”

Looking back on his years working with Krakoff, Frankfort said, “It’s been an amazing partnership, both professionally and personally. Reed and I have been building a strong creative team. They are benefitting from Reed’s tutelage.”

Over the last quarter Coach has hired executives to progress the brand’s in-store merchandising, design, licensing, and product development. All of this is part of its quest to elevate its status to a “global lifestyle brand rooted in accessories,” as Frankfort likes to call it. Instrumental to this transformation is a curated capsule collection that will flow into stores on a quarterly basis and inform the fashion direction of the brand’s collection. The collection of looks will encompass handbags that range from $500 to $800, and comparably priced footwear and apparel. This will naturally elevate Coach’s price range. Currently, Coach’s sweet spot for bags in North America is $300.

With the new team in place, Frankfort underscored that Krakoff’s departure — and his own, to some extent — will make for a “seamless transition.”

Recently, Coach brought on Sandra Hill as executive vice president of women’s design, Jeffrey Uhl as senior vice president of men’s design, Javan Bunch as senior vice president of licensing and Maria Turgeon, who was promoted to the new role of senior vice president of women’s factory design.

Zach Augustine, executive vice president of global environments, and Erin Thompson, vice president and artistic director of global environments, joined team Coach last quarter.

The intangible magic of Frankfort and Krakoff has left an indelible mark on the brand.

“We met in this room,” said Frankfort, sitting comfortably in a brown leather chair positioned next Krakoff in the conference room.

Sixteen years ago, Frankfort had a meeting with Krakoff, who was about to get on a plane to fly to Milan to go work for Italian house Trussardi.

“I persuaded him to help me transform Coach from a house of American leather goods into a modern accessories brand,” the ceo said with a smirk. “We’ve exceeded our highest expectations. Each milestone led to looking for a new one. The brand has flourished, the business as well. It’s been a remarkable journey, a lot of hard work, a lot of fun…and incredibly successful.”

Frankfort joined Coach 33 years ago as vice president of new business development when the company was a small, family-run leather goods maker. In 1985, Sara Lee Corp. bought Coach for $30 million. That year Coach’s sales were $19 million and Frankfort took over as president. Ten years later, in 1995, Frankfort was named chairman and ceo. Sales topped $500 million a year later, and in 2000, Coach went public through an initial public offering, raising $118 million at $16 a share.

In 1996, Frankfort hired Krakoff, who is largely credited with changing how the brand merchandised and developed its handbag collections. Krakoff pumped up Coach’s fashion quotient for bags and how fast the brand brought new designs to market. Krakoff began bringing new collections to market at the same frequency that new designs in rtw appeared in stores, which was a novel concept at the time. Just five years after Krakoff started, Coach’s sales reached $616.1 million.

Rapid expansion both domestically and internationally followed suit, as did the establishment of a men’s business; Poppy, a contemporary youthful accessories brand, and Krakoff’s luxe sportswear line. Although Coach was founded in 1941, Frankfort, with the help of Krakoff, is recognized for building the brand to what it is today, a $4.76 billion company.

Back at Coach’s headquarters, Krakoff seemed less nostalgic than amazed at what he has been able to accomplish with Frankfort.

“It’s difficult to put into words,” Krakoff said of his relationship with the ceo. “It’s really surpassed expectations. The key to our success is that we had absolute trust and could see the other side of the issue.”

With Coach in the midst of growing its business in Asia — in China, the firm is on track to generate at least $400 million in sales this year — as well as its men’s business, which is on course to earn sales of more than $600 million globally in fiscal 2013, up 50 percent from last year, Krakoff leaves the brand at a critical time.

Business in North America has been moderating somewhat, as consumers in the U.S. continue to shop bargains and look to high-flying rival brands such as Tory Burch and Michael Kors for trendy bags.

But according to Coach, Krakoff’s designs will be part of the brand’s collections through June 2014. What’s more, his influence on how Coach evolves its look both in-store and via product will be felt during its evolution to becoming a lifestyle brand. Consumers will begin to notice changes starting at holiday.

For Krakoff, the challenges that Coach has faced in its evolution are something he will bring to RK, he said, adding that lessons he has learned from Frankfort will also serve him dearly as he moves on.

“It’s a time of new beginnings for us both,” said Frankfort, who, when asked if he foresees working with or playing a part in Krakoff’s new business, added, “Life is very long. Reed and I will be involved with each other, continuing.” With a knowing grin, the ceo offered, “What I need to do next with Reed is to play chess with him.”

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